Why Climate-Related Proposals Require Fortitude

Pension funds and faith-based groups can take on the likes of ExxonMobil on carbon risk, but the task is difficult without management support.


Patrick T. Fallon

For Vermont state treasurer Beth Pearce, the shareholder vote on greenhouse gas emissions at Exxon Mobil Corp. last May was pretty disappointing. After resounding victories on climate-related shareholder resolutions at three of Exxon’s European rivals, support from the broader investor community failed to materialize when votes were tallied at the company’s annual meeting in Dallas.

Pearce and others who regularly file shareholder proposals on climate don’t give up easily, however. “We’re hopeful we’ll get better results this time around,” she says. “It’s an important issue, and we’re going to continue to make our case.”

Pearce has reason to believe things will be different this year. There’s the momentum from the Paris Climate Agreement. Exxon seems particularly vulnerable on the subject: New York State Attorney General Eric Schneiderman — and now possibly the Federal Bureau of Investigation — is looking into whether the company lied to investors and the public about causes of climate change. Moreover, the Exxon resolution Vermont signed onto this year is the same as proposals that garnered nearly 100 percent shareholder approval at London’s BP, the Hague, Netherlands–based Royal Dutch Shell and Stavanger, Norway–based Statoil last proxy season.

The proposal, filed by the New York State Common Retirement Fund and the Church of England, asks the company to annually assess and disclose how falling demand for fossil fuels, the result of global efforts to keep the planet’s warming trend under 2 degrees Celsius, could potentially affect its business.

So, if essentially the entire shareholder voting base at three European oil companies could be persuaded to support the proposal, shouldn’t one expect a strong showing at Exxon? And isn’t this question especially noteworthy, considering that many financial institutions and mutual funds have holdings in oil companies on both sides of the Atlantic?

Don’t bet on it. The reason: The proposals at the European companies had the support of management, and the boards at BP, Shell and Statoil urged shareholders to vote for them. Exxon shows no signs of such support. In fact, in a proposal to the Securities and Exchange Commission, the firm asked the regulatory agency not to take punitive action should Exxon omit such a resolution from the ballot. (A spokesman for Exxon declined to offer comment beyond that contained in the company’s public correspondence on the proposal with the SEC.) On March 23, the SEC rejected Exxon’s request, allowing for the inclusion of the proposal on the ballot. Shareholders will now vote, however, many will follow management’s lead and vote no.


“[Management support] makes a big difference for a lot of investors, including ourselves,” says Michelle Edkins, who leads the global corporate governance team at BlackRock in New York, the world’s largest asset management firm and one of the top ten institutional holders of both Exxon and Chevron Corp. “We would only vote for a shareholder proposal on an issue like climate risk disclosure if we thought that management was not doing an adequate job of addressing the risk underlying the disclosure request and we consider it to have the potential of near-term material financial impact on the company.”

A representative from Malvern, Pennsylvania–based Vanguard Group said in an e-mail that its mutual funds, which hold top positions in BP, Shell, Exxon and Chevron, wouldn’t necessarily vote the same way for the same proposal at different companies. She stresses that they don’t always vote with management, and each case is analyzed individually. In general, though, the company considers corporate and social policy issues “ordinary business matters,” according to its web site. And the funds will typically abstain from voting on these proposals, “unless they have a significant, tangible impact on the value of a fund’s investment and management is not responsive to the matter.”

Instead, these firms prefer the direct-engagement approach. “To really push for change at companies where they have a relatively long history of not paying heed to shareholder proposals, you need direct engagement,” Edkins says. “While a company’s successful, sometimes it can be very hard to register some of these messages with management.”

Investors have been urging Exxon to confront the threat of climate change in one way or another for decades, but the company has regularly rejected shareholders’ requests and dismissed their concerns. According to a story by the nonprofit InsideClimate News, Exxon appears to have actively campaigned against last year’s proposal to set companywide goals to lower greenhouse gas emissions brought by Montclair, New Jersey–based Tri-State Coalition for Responsible Investment, which represents 40 Catholic groups that have pension funds with significant holdings in Exxon. In the end, the resolution garnered less than 10 percent of the vote at Exxon.

This year shareholders have filed more than 60 climate-motivated resolutions with U.S. oil and gas companies, according to Boston–based nonprofit sustainability advocacy group Ceres. And carbon asset risk proposals continue to move the bar at certain companies. The board at Calgary’s Suncor Energy is recommending shareholders vote for a resolution similar to that presented to Exxon’s.

“I have been hearing from investors that enough has changed this year — whether it’s the sustained low price of oil, or the success of the Paris negotiations, or the New York attorney general investigation, which I think really woke people up — that climate change has become a much more high-profile financial issue,” says Andrew Logan, the director of the oil and gas and insurance programs at Ceres. “It will be an interesting test come spring as to whether concern has shifted enough for investors to change their behavior.”